A Shareable Explainer: The Circular Economy

In 2013, people around the globe bought more than 1.8 billion mobile phones. But now, nearly half of them are most likely in landfills or at homes, sitting there without any use, as their owners upgrade to newer versions. Imagine, however, if these devices went back to the manufacturers once their lifespan came to an end in order to be turned into new mobile phones. How much would that save the manufacturer in terms of raw materials and time? Or what would be the result if these devices didn't have to be replaced because they were easily repairable and upgradable?

This is what could be called a "Circular Economy" approach, a new model of production and consumption that thinks of our impact on the environment and our society as a whole. Circular Economy takes us away from the linear take-make-dispose economy we are immersed in and encourages us to rethink waste and energy use. It's an invitation to change from product design, manufacturing processes and supply chains, to consumer perceptions and our lifestyles.

Outline

What is the Circular Economy?

When was the concept born?

What are the key principles of Circular Economy?

What are some examples of Circular Economy?

Who is the Circular Economy for?

What are the benefits of the Circular Economy?

What are the key challenges of putting this model into practice?

What is the Circular Economy?

The Circular Economy is an alternative to our dominant linear economic model. It is grounded in the study of living systems and nature itself. We are pretty used to collecting and transforming resources that are later consumed and, once their lifespan ends, become waste. However, if you look at nature, you can see that processes are totally different. A tree is born from a seed, it grows and reproduces and when it dies, it goes back to the soil, enriching it and providing nourishment for new life. How could we apply that process to the objects we use at home and work?

"Circular Economy is a new business paradigm, inspired by nature, where all energy and resources flows are maintained in closed loops, eliminating the concept of waste while generating economic, social and environmental value," explains Nicola Cerantola, founder and director of Ecologing, an organization that helps businesses find sustainable ways of doing their work. "The Circular Economy is not waste management — it is about exploring new mechanisms that enable a radical and regenerative transformation of the society towards a healthier, fairer and sustainable world."

The Circular Economy looks at all the options across the chain to use as few resources as possible in the first place, keep resources in circulation for as long as possible, extract the maximum value from them while in use, and recover and regenerate products at the end of service life. Javier Goyeneche, co-founder of sustainable clothing brand ECOALF, puts it simply: "Circular Economy means not to understand garbage as a waste but as a potential resource that can be reused."

This new way of understanding goods also means designing products to last so that materials can be easily dismantled and recycled.

The concept of Circular Economy has been gaining momentum since the late 1970s, when researchers Walter Stahel and Genevieve Reday sketched the vision of an economy in loops and its impact on job creation, economic competitiveness, resource savings, and waste prevention. They conducted a research for the European Commission and published their conclusions later in a book called "Jobs for Tomorrow: The Potential for Substituting Manpower for Energy."

In many ways, the Circular Economy model shares key ideas with others such as Biomimicry, which studies nature and imitates its designs and processes to solve human problems; the Cradle to Cradle proposal, which advocates for extending a product lifespan; and the Blue Economy, that uses open-source solutions based upon natural processes.

What are the key principles of the Circular Economy?

The Circular Economy is based on three key principles, as explained by the Ellen MacArthur Foundation, one of the main organizations promoting this economic model worldwide:

Preserving and enhancing natural capital by controlling finite stocks and balancing renewable resource flows. That is, using as less raw resources as possible and if totally needed, choosing renewable or better performing ones.

Optimizing resource yields by circulating products, components, and materials at the highest utility at all times in both technical and biological cycles. This means designing for remanufacturing, refurbishing, and recycling to keep components and materials circulating in and contributing to the economy.

Fostering system effectiveness by revealing and designing out negative externalities. This includes reducing damage to human utility, such as food, mobility, shelter, education, health, and entertainment, and managing externalities, such as land use, air, water, noise pollution, release of toxic substances, and climate change.

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What are some examples of the Circular Economy?

The Circular Economy has already been put in place by many organizations and businesses around the world. The sectors that have adopted the Circular Economy approach are ones related to scarce or special materials or/and fragile supply chains, according to Cerantola. "All the materials that are valuable for being recovered have started to be circularized even decades ago; let's think about plastics, steel, gold or aluminum. Now the challenge is to spread this close loops systems to all the economic sectors and regions including materials that are less noble or apparently not so profitable such as textiles, for example."

Fishing Nets

The also researcher on Sustainable Design and Green Entrepreneurship, Nicola Cerantola, highlights the project Econyl by Aquafil. This company, based in Italy, has been researching and achieving to upcycle (recycling without losing quality of the material) its main raw material, the nylon. "They did it not only for complying with their CSR but also for strategic reasons since they forecasted a 30 percent increase on the demand for nylon in the coming years. So to prevent from suffering from supply chain disruptions or price volatility they chose to explore a circular way of doing business," says Cerantola.

As a result, this enterprise is currently recovering and upcycling used fishing nets around the world to create new fishing nets. It also provides other fishing services.

"This is one of the key in the transition to the circular economy, find the ways to align business interests with humanity's," adds Cerantola.

Sustainable Clothing

Another initiative that reuses fishing nets, this one in the fashion industry, is ECOALF. ECOALF is an eco-friendly fashion label that today produces more than 100 different fabrics made from recycled materials such as fishing nets, plastic bottles, used tires, and coffee grounds.

ECOALF was created by Javier Goyeneche in 2012 "from a deep frustration with the excessive use of the world's natural resources and the amount of waste produced by industrialized countries — specifically by the fashion industry." Today, ECOALF's team manages the full process from waste collection to recycling technologies, manufacture, design, and retail.

Currently in 11 countries, the company seeks to create the first generation of recycled products with the same attention to quality, design, and technical properties as the best non-recycled products in the market. "There is absolutely no need to continue depleting the earth's natural resources for the sake of production," says Goyeneche.

Bioclimatic Architecture

The Circular Economy model can also be used in architecture, focusing on three key resources of this sector that can work on a closed-loop: energy, construction materials, and water.

Think of a house that is designed to maximize natural resources like sunlight and the wind; one that is built using biomaterials (sheep's wool insulation can be reprocessed back into insulation or into fiber for use in clothing) which are locally sourced, have a low carbon footprint, and do not harm the environment. As architect Pablo Farfán explains, there are architectural organizations that are using the Circular Economy model all over the world: Passivhaus and Bioconstruction in Germany, Earthships in New Mexico, and the Neo Vernacular architecture in the U.K.

Traditional Businesses

Fortunately, there are many more examples of how to apply Circular Economy processes even in traditional companies and institutions.

The electronics giant Philips based in the Netherlands is experimenting with a "Pay per lux" model. Under this model, the company maintains ownership of the materials, while customers benefit from maintenance and service, as well as from the option to adapt or upgrade their electronics, with the manufacturer able to recover the materials when necessary. Dell has made the first computer using certified closed-loop recycled plastics and uses its international position to influence standards and policies toward a circular economy. And Levi's has started accepting old clothes in its stores and turning them into building materials. It also plans to recycle old Levi's jeans into new ones in the near future.

Meanwhile, in Denmark, where the public sector procures goods and services for around 38 billion euros annually, a national initiative is aiming to shift the country's public procurement practices to support a Circular Economy by prioritizing criteria such as the use of non-toxic chemicals, extended product lifespan, and the cycling of biological and technical materials.

A modular phone. What if we designed products to last? Photo by Dave Hakkens via Wikimedia Commons

Who is the Circular Economy for?

Despite the fact that there are more and more organizations using the circular approach, there is still a long way to go until this proposal becomes mainstream. Cerantola, founder of Ecologing, believes the reason why Circular Economy has not become popular yet is that the early adopters have not been consumers, but industries seeking cost reduction, competitive advantages, or innovative business models.

However, consumers need to be part of the equation. In addition to the financial, political, and legal support for the Circular Economy, there is a need for education on this model in schools, public and private groups, and media outlets.

What are the benefits of the Circular Economy model?

There are lots of advantages to adopting the Circular Economy. First of all, the Circular Economy commits to reducing water and energy consumption and using energy from renewable sources. By reducing waste, it also diminishes the negative impacts associated with overflowed landfills that contaminate water and soil. Not only does it have a positive environmental impact, it is also good for enterprises and the economy.

When dependence and price of natural resources lower, risk is minimized and businesses become more sustainable and self-reliant, too. It is true incorporating new recycling and remanufacturing processes require investment, but the efforts will always pay off. Circular Economy improves the reputation of businesses, and it benefits local economies by generating wealth and employment opportunities — for instance, it opens up new avenues for businesses such as repair and maintenance services.

Finally, from the consumers' point of view, it results in longer-lasting products and even a small stream of income when businesses and other organizations begin offering incentives for returning old goods.

What are the key challenges of putting this model into practice?

The transition towards a more circular economy is not easy. This is not something a single business can do on its own. There is a need for public support and investors willing to take this model to the next level.

As a society and as individuals, we need to be ready to assume the costs of this change. Architect Pablo Farfán uses bioconstruction as an example: If you want a house that is built in a more environmentally-friendly way and is self-sufficient, you will have to invest a bit more money, but the benefits in the medium and long term will make it worth it.

Ecologing's Cerantola says: "Financial issues are to be tackled to grant funds and investments. Education and entrepreneurship need to be promoted.

Chemistry needs to provide us with new processes and solutions. … Life needs to be reinterpreted towards less material and more experiential and conscious style. Much is to be done yet, but the transformation is under way. It is just a matter of time."

The Circular Economy offers a unique opportunity to make our economy more sustainable and competitive. Let's change the economy to change the world.

This piece was written by Isabel Benitez, who is responsible for International Media at theNew Economy and Social Innovation Forum (NESI Forum), with the contributions from Nicola Cerantola (founder of Ecologing), Javier Goyeneche (co-founder of ECOALF), architect Pablo Farfán, as well as speakers and collaborators of the NESI Forum.

Shareable is media partner of the NESI Forum, a nonprofit initiative will bring together change-makers and thought leaders to conceptualize, discuss, and lay the foundations of a new economy, in Malaga, Spain, from April 19-22, 2017.